Georgia jobs, lumber and the Canada-Trump confrontation

Lost in a frenzy of political news, a presidential feud with Canada might be easily overlooked, but it’s no small deal for Hal Storey in Floyd County – or for Georgia’s other lumber companies.

Storey is vice president of S.I. Storey Lumber Company in Armuchee. The 97-year-old, family-owned business, which is about 10 miles north of Rome, has a wholesale business that bumps up often against the Canadians.

And the market confrontation is not fair, Storey said, since Canadian lumber is unfairly subsidized by the government.

“Canadian subsidies have a negative impact,” he said. “It comes down to jobs.”

The U.S. government has long agreed – the argument isn’t new. What is new is the decision to slap heavy tariffs on Canadian lumber, the decision announced several weeks ago by President Trump.

Trump’s promise drew a threat from Canadian Prime Minister Trudeau to retaliate against American coal. That sector was often cited by Trump during his campaign last year, so it’s not clear how the dispute will play out.

But if the imbroglio raises prices of lumber, it will not be good for Atlanta’s housing market, since wood is an important component in home-building and renovations.

If builders pass along higher wood costs, they translate to higher home prices. If they don’t pass them on, they further squeeze profit margins – which gives builders an incentive to focus on higher priced homes.

How much that hurts depends on how much they rise.

But at least in the short-term, Georgia’s lumber industry would benefit from any action that raises prices for Canadian competition.

The problem, Americans say, is that nearly all the standing lumber in Canadian forests is owned by the government. Lumber companies buy that wood, but the price is set by the government, which can keep it artificially low.

With lower costs, Canadian companies can keep profits high, even if they drop their own prices. And when they do, everyone in the U.S. – even those with much higher costs – must follow suit, Storey said.

“If everybody starts selling lumber dirt cheap, then we’re going to sell it dirt cheap, too.”

Among aggrieved Georgia timberland owners is former president Jimmy Carter. Although no fan of the current administration, Carter recently penned an op-ed for the Washington Post supporting Trump's actions against Canada.

"Timber sales are a major source of income for my own family, and we have suffered financially for many years from an unfair advantage enjoyed by our major competitor in this vital market," Carter wrote in the Post.

According to Carter, a level playing field would mean 16 percent of the market supplied by imports, “but now about 32 percent of our lumber is being imported from Canada.”

The Canadian government, for its part, says it is not putting its thumbs on the scales.

The price charged lumber companies in Canada is based on market conditions and the swings in the value of Canadian and U.S. currency matter more, the government argues.

Moreover, Americans need the lumber, said Louise Blais, consul general of the of the Canadian Consulate in Atlanta.

“The United States can only produce 70 percent of the lumber it needs,” she said. “That other 30 percent has to come from somewhere.”

The two governments have been in talks since a 10-year agreement lapsed in 2015 and a resolution is possible, she said.

If the United States follows through with the tariff, the action will be counter-productive, Blais said. “The tariff is actually going to hurt the American consumer. There will be fewer jobs, slower economic growth and less affordable housing.”

Storey has about 45 employees, its lumber used in a range of locations, including Six Flags Over Georgia, Elitch Gardens in Denver and Wigiwam in Belgium.

In fact, last year, they exported more than a fifth of their production, although that varies, he said. “Next year, it may be 1 or 2 percent.”

But in any market – the U.S. or overseas – the Canadian lumber companies have a distinct advantage, Storey said. “We see the effect – mainly when it comes to pricing, but also in the number of jobs in our industry.”

Many mills have shuttered over the past three decades, he said. And while the recession and housing bust had a painful impact, the trend started long before that and the playing field is not level.

“We’ve had more closures than north of the border and part of that is the competition. It’s really unfair.”

Nationally, there are 360,000 in the lumber industry, according to Zoltan van Heyningen of the U.S. Lumber Coalition, which includes both large and small producers.

Georgia has about 26,000 workers in lumber, producing shipments valued at $3.2 billion, according to van Heyningen.

In the forestry sector overall, Georgia has more than 50,000 workers in forestry, according an analysis for the Georgia Forestry Commission by Georgia Tech's Enterprise Innovation Institute. Among manufacturing sectors, only food processing is larger, according to the study.